Value investing - an introduction to benjamin graham

1. Benjamin Graham: The Father of
Value Investing
Anand Kumar Jha

2. Who is this Guy?
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-
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An
influential
economist
and
professional investor - born on May 8,
1894 in London.
In 1926, Investment partnership with
Jerome
Newman
&
first
hand
experience of the Crash of 1929.
Published
the
classic
“Security
Analysis” with David Dodd in 1934
Taught Warren Buffett at Columbia
University.
In 1949, wrote The Intelligent Investor,
the Bible of value investing.
Died in 1976
Dean of Wall Street, Father of Security Analysis and
Value Investing

3. General Advice to Investors
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Be an investor, not a speculator
Don’t expect to profit from market movements
Know the asking price – Understand the difference
between Price and Value.
Rake the market for bargains
NCAV rule is useful, but rules out most stocks
Only buy when there is a “margin of safety”
What’s the stock worth?
Graham Formula IV (Intrinsic Value) = E*(2R+8.5)*4.4
/Y
Regard corporate figures with suspicion
Don’t stress out – don’t expect every decision to be
perfect.
Don’t sweat the math i.e. Smart investing does not
require higher math.

4. General Advice to Investors
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Rule#1: Diversify with stocks and bonds.
Asset allocation at least 25% bonds, at least 25%
stocks
Increase bond allocation if the earnings yield on
stocks is less than the yield on high-quality bonds
Rule#2: Diversify with a wide variety of stocks.
Try to hold at least 30 different stocks
When in doubt, stick to quality
Dividends provide a clue
Defend your shareholder rights
Be patient
Be prepared (financially and mentally) for prolonged
market downturns
Think for yourself!

5. Growth + Value
4 Legendary Investors
• Benjamin Graham
– The Father of Security Analysis
– Developed the field of “value investing”
• Philip Fisher
– Started in 1928, still investing today
– “It’s quality that counts”
• Warren Buffett
– Berkshire Hathaway
– Investing from a “business perspective”
• Peter Lynch
– Fidelity Magellan (1977 – 1990)
– Invest in “understandable” stocks

6. Is Graham still relevant???
“There is only one Dean in our profession, if security analysis can be said to be a
profession. The reason that Benjamin Graham is undisputed Dean is that before
him, there was no profession and after him they began to call it that.”
- Adam
Smith